Millions of student-loan borrowers are falling into default — and the newest wave is older than before.
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About 3.6 million federal student-loan borrowers defaulted in the past two quarters, after a pandemic-era repayment pause ended and collections began again, according to new data from the New York Federal Reserve.
Researchers said the average newly-defaulted borrower is 40 years old, with the majority being 50 or older; is more likely to live in the South; and often was not behind on their student-loan payments before the pandemic.
Default puts them at risk of wage garnishment and the seizure of federal benefits, though those consequences are temporarily paused. Millions more who are kicked off a key affordable repayment plan could take a hit later this year.
Fed researchers said that this wave of defaults was expected. Former President Joe Biden paused student-loan payments and interest during the pandemic, and while payments resumed in fall 2023, missed payments were not reported to credit bureaus during a one-year “on-ramp” period that ended in October 2024.
Given that, the researchers wrote in the blog post that “we believe that the largest wave of student loan defaults has passed.”
More borrowers could fall behind later this year, though, after President Donald Trump eliminated the SAVE student-loan repayment plan, which was created by Biden to give borrowers cheaper monthly payments. The 7 million borrowers enrolled in SAVE will be required to switch to a new plan beginning in July, and Fed researchers said on a Tuesday press call that delinquencies for those borrowers could appear toward the end of 2026, with defaults expected in the middle of 2027.
These findings come after the Trump administration paused involuntary collections on defaulted student loans in January, including wage garnishment and the seizure of federal benefits such as Social Security. While it did not specify when the pause will lift, the administration is preparing to transfer management of the defaulted student-loan portfolio to the Treasury Department, which is expected to assume collections responsibility.
A shift in the average defaulted student-loan borrower
The New York Fed’s blog post said that the average borrower in default is nearly 40 years old, compared with about 36 before the pandemic — and that the shift is not due to the same borrowers getting older.
“There’s a real demographic shift,” a researcher said on the press call. “Older student loan borrowers are struggling with payments at a higher rate than before the pause.”
Parent PLUS borrowers could be contributing to that increase, researchers said.
The federal Parent PLUS program allowed parents to borrow the full cost of attendance for their child’s education. Parent PLUS borrowers were not eligible for the SAVE plan, meaning they did not receive the same SAVE-related forbearance that began in July 2024 and may have been part of the new default wave.
The researchers said that, based on income data from tax records and the American Community Survey, the South tends to have lower income levels and higher delinquency rates.
The researchers also found that at least 10% of newly-defaulted student-loan borrowers were in Louisiana, Mississippi, Alabama, Georgia, and South Carolina. They said lower income levels and higher delinquency rates in the region could explain this concentration.
The consequences of default can be severe, the researchers said. In addition to wage garnishment and benefit seizures, borrowers would be cut off from accessing traditional credit while the default remains on their credit reports, which typically last 7 years. That could hinder their ability to take out a mortgage or auto loan.
